Beijing (AsiaNews/Agencies) – China’s central bank raised interest rates last night, a further sign that Beijing is increasingly worried about a decade-high inflation and rising liquidity.  Meanwhile thousands of workers take to the streets to demand wage increases to compensate for soaring consumer prices.

For the fourth time since August 2006, the People's Bank of China said it would raise the one-year yuan lending rate 18 basis points to 7.02 per cent from 6.84 per cent and increase the one-year yuan deposit rate by 27 basis points to 3.6 per cent from 3.33 per cent.

The mainland consumer price index last month climbed 5.6 per cent year on year, the highest rise in ten years.

Lower-middle households were the hardest hit were; their food bill rose by 15.4 per cent, especially meats (+45.2 per cent), eggs (+30.6 per cent), cooking oil (+30.1 per cent) and vegetables (+18.7 per cent), i.e. basic staples on Chinese tables. Unofficially though, on the spot market surveys indicate that price hikes were even higher.

Despite scanty results, the central bank also increased reserve requirement ratios for commercial banks six times this year in an effort to mop up excessive liquidity in the banking system.

But rising prices have pushed workers to demand higher wages, a demand that threatens social stability according to Prime Minister Wen Jiabao.

Yesterday about 4,000 workers employed by German power supply and battery charger maker Friwo marched on Baoan Road in Baoan district (Shenzhen), calling for higher salaries to compensate for higher cost of food and other essential items.

Riot police arrived about an hour later to disperse the crowd and arrested at least three female workers.

Several thousand workers went on strike at the factory on Monday, and Friwo, which supplies Nokia and Motorola, appealed to the workers to go back to work and promised to negotiate on the pay issue.

The government did force all employers to increase minimum monthly salaries, but increases have lagged far behind inflation, especially essential items like food.

In an interview with the South China Morning Post Yau Zi-wei, from the Hong Kong-based non-government organisation Students and Scholars Against Corporate Misbehaviour, said that companies, whilst accepting to pay higher wages, are using any means to minimise the mandated pay rises. For instance some have deducted more money for meal charges in company canteens or imposed “strict output demands. If the workers cannot meet their quota during the day shift, they have to keep working at night without overtime pay.”

A Friwo worker said that since last month, their workload had increased nearly 20 per cent. “Under the new workload, most of us have to work more than 12 hours a day but are not paid any overtime,” she said.